Housing Issues (f/k/a Harris Economic Agenda Speech)

[UNCatTech]

Naturally. Depends on the area, naturally. Here, you can rent a house for $4-5k a month or buy one for 10k a month plus 200k down.

The US needs more density. NIMBYs are one major group against it. Maybe converted office space to apartments will help with that transition.

I do agree that NIMBYs are a problem. I get tired of the people fighting growth and development based on them not wanting more traffic.

I was also wondering about you perspective being driven by living in California.

 

[UNCatTech]

The secret is getting people out of their cars. Commercial enterprises included within walkable distances of dense development and mass transit to move a lot of people point to point.

Agreed this is another variable. And I would love to have a mass transit option to get to work. But I don't believe we will ever have the density to get this above a certain percentage.

I also drive a hybrid to try and help.

 

[UNCatTech]

And investment firms are simply buying up all the existing housing raising prices and rents.

I really don't like profiteering off of basic living necessities like housing and food.

 

[Centerpiece]

Price controls are pretty socialist, no?

That’s a BS take. I bet you’re the first to beeyotch about inflation at the grocery store… manufactured inflation as corp. absconds away with record profits.

 

[UNCatTech]

A question about density. How do we avoid the situation we currently have in Florida condos in the future with more density.

 

[grimes70]

I don't believe these numbers are accurate in our current environment. For an equal space I don't believe the rent is drastically less.

I pay $3000 a month mortgage. My neighbor in an equivalent home is paying $3500 rent.

Yes, my BIL rent is half my mortgage, but its not an equivalent home. Though it does meet his needs, so an example of needing variety.

I'm for what each individual needs. We have to have options, homes, apartment, condos, rent purchase, we need all of these options.

An aside on you example of investing the difference. What percentage of people do you believe could and would do that?

I wasn't arguing equivalent space. As you stated, needs. Or wants. If you want a 3,000 sq ft house with yard and upkeep good for you. Buy it. If you want to come home from being on the road all week and you just want to chill, perhaps you don't need the yardwork. Live in 1,000 sq. ft., hang out at the (free) pool.

Have a high school friend who has baically been doing this his whole life. Makes good money; vacations all ovr the world. Has absolutely no worries about $ for retirement. And though I agree that the number of people who invest the difference is smaller, it's not like everyone who buys a house is thinking 20-30 years down the road. And given today's mobile society, the % of people living in one place long term is going down. Yes, selling prices are way up now; so is buying. Sucks to buy high and a few years later a downturn and you have to move.

How many lower, even working class, people can realistically buy 2,5000 sq ft homes while paying hoa fees, etc.? That seems to be the minimal size of single family homes being built today.

 

[Enigma94]

You certainly can live a fine life renting and as said often on this thread, everyone’s situation is different. Of course someone making a lot of money is going to do well whether they buy or rent. I’m just saying that these companies that buy homes to rent are paying the same price a homebuyer could and then paying the mortgage plus all the upkeep, taxes and insurance over the years all while earning a nice profit. The yield on cost of these properties typically runs between 8-10% and with appreciation the IRR can be in the 20’s. Of course a downturn could eat into that and if you get caught needing to sell during one it sucks, but generally speaking home values rise over time. I do agree that the calculus has changed somewhat with how much more mobile people have become but with WFH it may allow more people to choose where they live and stay in place even if they change jobs. It’s a puzzle with many pieces but we definitely need to find ways to make home ownership affordable and not just rely on renting.

 

[altmin]

I disagree. From what I've read we fell significantly behind in building during the housing crisis, when we basically didn't build for a couple years. Building was also down during covid. From what I've read the supply was keeping up prior to the housing crisis.

Also, look at what is happening with the high rise condos in Florida. I would much prefer to be responsible for my own home.

Now if I choose to live in NYC, the variables would make for a different decision.

Another thing that seems to be neglected in this conversation is rising rent.

My BIL is paying more in rent for an 750 sq ft apartment in an Atlanta than my daughter pays for her mortgages on her 1000 sq ft home.
There are small town homes in my area renting for $2500 a month. Homes in my neighborhood are renting for $3500. This conversation seems to imply that renting is far cheaper than a mortgage. That has never been my experience.

Again, I'm not against renting.

I believe there need to be multiple options so that we have adequate housing for everyone.
Everyone doesn't have the same needs or the same desires for housing.

also AirBnB has let to a lot of potential homes spending a lot of time vacant.

 

[grimes70]

You certainly can live a fine life renting and as said often on this thread, everyone’s situation is different. Of course someone making a lot of money is going to do well whether they buy or rent. I’m just saying that these companies that buy homes to rent are paying the same price a homebuyer could and then paying the mortgage plus all the upkeep, taxes and insurance over the years all while earning a nice profit. The yield on cost of these properties typically runs between 8-10% and with appreciation the IRR can be in the 20’s. Of course a downturn could eat into that and if you get caught needing to sell during one it sucks, but generally speaking home values rise over time. I do agree that the calculus has changed somewhat with how much more mobile people have become but with WFH it may allow more people to choose where they live and stay in place even if they change jobs. It’s a puzzle with many pieces but we definitely need to find ways to make home ownership affordable and not just rely on renting.

Well thats one of the problems isn't it. Corporations buying up housing stock.

 

[Enigma94]

Well thats one of the problems isn't it. Corporations buying up housing stock.

It’s a much smaller part of the problem than lack of new supply. Something like 75% of all landlords are mom and pop, although that is changing more recently as PE capital has pursued the market.

 

[farce©]

According to Redfin, "Investors Bought 1 in 6 U.S. Homes that Sold in the Second Quarter of 2024. Investors purchased 16.8% of U.S. homes that sold in the second quarter—the highest second-quarter share on record aside from 2022. That's down from an all-time high of 20.8% hit during the pandemic but up from 16% a year earlier."

 

[Mulberry Heel]

According to Redfin, "Investors Bought 1 in 6 U.S. Homes that Sold in the Second Quarter of 2024. Investors purchased 16.8% of U.S. homes that sold in the second quarter—the highest second-quarter share on record aside from 2022. That's down from an all-time high of 20.8% hit during the pandemic but up from 16% a year earlier."

I'm hardly an expert in this field, but based on what I've read since the pandemic and just from my own personal observations in a very rapidly-growing suburb, it seems as if two of the major problems (beyond high interest rates and an enormous surge in housing prices) that are keeping many people - especially younger couples and families - from buying a home is that 1) Few contractors are building smaller starter homes anymore, instead nearly all of the money is in big McMansion homes that fewer people, especially young couples, can afford. And many communities now don't want starter homes for various reasons mentioned earlier. And 2) starter homes that exist are increasingly being bought by investors and companies and sold or rented at jacked up prices. Many of these groups aren't even located in the area and know nothing about the region, they're solely in it to maximize profits by limiting the number of homes available, thus keeping rents and/or sales prices higher than they should be.

I'm sure more knowledgeable folks will correct me if I'm wrong, but just based on what I've read and heard and seen this appears to be two of the biggest problems limiting homeowning right now. I know younger people who live in older starter homes (built 1970s/1980s) in our suburb and they say they are constantly getting junk mail/spam emails/texts and offers from investors to buy their homes on the spot, and some people in their neighborhoods have sold their homes, which are being turned into rental properties at ridiculous prices.

 

[SnoopRob]

I disagree. From what I've read we fell significantly behind in building during the housing crisis, when we basically didn't build for a couple years. Building was also down during covid. From what I've read the supply was keeping up prior to the housing crisis.

I've worked in and around affordable housing for more than 20 years now.

There was a significant problem before the housing crisis and before COVID, but those 2 large-scale events did make it much, much worse.

There are many inputs into the affordable housing issue and there isn't one single cause.

Building more affordable housing units is the solution across the board. What those units look like will likely be different in different areas. In and around major cities, those are going to have to be high-density housing because land is just too rare/valuable. In other places where land is more readily available, that will likely look more like single-family units along with some high-density housing.

The soaring cost of rents is directly related to the lack of availability of affordable units. Increasing the availability of affordable units, even if those are heavily tilted toward ownership, is the solution to both problems.

Of course, the devil is in the details and figuring out a program that significantly increases the number of affordable units without being a giveaway to those who would merely use those programs for short-term gain would take some work.

 

[CRHeel94]

It’s a much smaller part of the problem than lack of new supply. Something like 75% of all landlords are mom and pop, although that is changing more recently as PE capital has pursued the market.

There was a Plain English that talked about the housing market...said that corporate holding of residential units/funds was actually pretty low (less than5% IIRC) and that it had little to no impact on home prices.

 

[Enigma94]

There was a Plain English that talked about the housing market...said that corporate holding of residential units/funds was actually pretty low (less than5% IIRC) and that it had little to no impact on home prices.

I forget the exact numbers but if you include multi family units it’s more in the 20%+ range and growing. If you are just talking single family units then that is below 5%.

 

[superrific]

In that example was considered that if the were in the house for 30 years and it is now paid off and they have an asset while the renter is still paying rent?

Well, in theory, the mortgage payments + taxes + repair costs should be higher than rent. And then it's a question whether you can a better return on the principal you are paying down or other investments.

The big issue really is tax. That's what pushes home ownership over rent for a lot of people.

 

[Enigma94]

Well, in theory, the mortgage payments + taxes + repair costs should be higher than rent. And then it's a question whether you can a better return on the principal you are paying down or other investments.

The big issue really is tax. That's what pushes home ownership over rent for a lot of people.

It’s actually the exact opposite. If I buy a house as an investor and the rent doesn’t cover the operating costs including mortgage, taxes, insurance and maintenance then I’m feeding it and it’s a poor investment. The rent covers all the expenses plus profit.

Taxes do complicate the situation some. For homeowners the mortgage deduction can improve the investment they make but my guess is most first time homebuyers aren’t clearing the current standard deduction hurdle. On the investor side depreciation creates a huge incentive that helps returns. I barely pay any tax on my cash flow for the properties I own because of the depreciation.

 

[farce©]

On the investor side depreciation creates a huge incentive that helps returns. I barely pay any tax on my cash flow for the properties I own because of the depreciation.

But that kicks you in the ass when you sell the asset.

 

[Enigma94]

But that kicks you in the ass when you sell the asset.

This is true but under current law if I hold until my death and pass on to my heirs then they get the stepped up basis which wipes out the depreciation and allows my children to begin depreciating on the same asset again, thereby giving the cash flow of that asset a boost upon inheritance.

 

[superrific]

It’s actually the exact opposite. If I buy a house as an investor and the rent doesn’t cover the operating costs including mortgage, taxes, insurance and maintenance then I’m feeding it and it’s a poor investment. The rent covers all the expenses plus profit.

Taxes do complicate the situation some. For homeowners the mortgage deduction can improve the investment they make but my guess is most first time homebuyers aren’t clearing the current standard deduction hurdle. On the investor side depreciation creates a huge incentive that helps returns. I barely pay any tax on my cash flow for the properties I own because of the depreciation.

I was comparing a homeowner to a renter. Not an investor/landlord. I wasn't clear about that.